On paper event risk is acute for the next four days, with the Federal Reserve due to conclude its policy meeting this evening, the British electorate going to the polls tomorrow and the possible introduction on Sunday of new US tariffs on Chinese imports. But currency price action has been relatively subdued, with markets seemingly confident that none of these three events will throw a major curve ball.
The Dollar is only marginally weaker ahead of the Fed’s last policy meeting of the year and the overwhelming consensus forecast is that it will keep rates on hold. The question is to what extent the Fed revises its growth and inflation forecasts for 2020 and leaves the door open to possible further rate cuts (or even hikes for that matter).
Sterling had a slight wobble in late trading yesterday after polling institution YouGov revealed that its latest analysis showed the ruling Conservative Party winning with a majority of only 28 seats in tomorrow’s general election. YouGov, the only major independent pollster to accurately predict the outcome of the 2017 general elections, had two weeks ago forecast a far more significant 68-seat majority for Prime Minister Boris Johnson’s party. However, Sterling has quickly recovered today with GBP/USD
back just below 1.32.
Markets seem to have made their mind up that the Conservative Party, which is currently short of a parliamentary majority, will remain in power and likely win a majority, the question being its size. Voting starts tomorrow at 07.00 (London time) and ends at 22.00, with the release of the first exit polls expected shortly thereafter.
